Green Mountain, manufacturer of the Keurig coffeemakers in which Diedrich's cups are designed to brew, outlasted Peet's, which opened the bidding with a $216 million offer on Nov. 3.
The competition is "a powerful signal that the Keurig single-cup system is hot and that the prospects for growth are broadly respected," wrote CanAccord Adams analyst Scott Van Winkle.
Just how much will the deal boost Green Mountain's prospects? Van Winkle predicts the company's share price could reach $95 by 2011, a gain of over 50% from its closing price the day before the deal with Diedrich was finalized. That's obviously a long-term proposition, but investors did push Green Mountain's shares up 4.5%, to $63.13, in midday trading on Tuesday.
"This combination further advances our objective of becoming a leader in the highly fragmented and competitive coffee and coffee maker businesses," Green Mountain CEO Lawrence J. Blanford said in a statement.
A Java-Fueled Stock Rocket
Peet's shares also surged, rising a similar 4.5% to $32.41. The company, which boasts a chain of coffee shops said to have been the inspiration for Starbucks (SBUX), had seen its stock rise to as much as $41.87 in mid-November before Green Mountain emerged with a higher bid for Diedrich's.
Of course, neither of its suitors can match Diedrich's buzzworthy stock market performance this year. It had already climbed 5,556% before Peet's initial takeover offer of $26 a share.Green Mountain's winning bid represents a 9,622% gain this year for investors in Diedrich's stock.
Chief among them are the company's executives, who own a 32% stake, according to Bloomberg News. "This transaction maximizes value for our shareholders," CEO Paul Heeschen said in a statement. Given the returns, that seems like an understatement.